Milling & Baking News - June 14, 2011 - (Page 16)

Business  Kellogg sets 2010 to the side, looks forward to better 2011 NEW YORK — A bumpy ride in 2010 has not deterred Battle Creek, Mich.based Kellogg Co. as it looks ahead to 2011, said John Bryant, president and chief executive officer. Mr. Bryant spoke June 2 as part of the Sanford C. Bernstein & Co. Strategic Decisions Conference in New York. Reflecting on the challenges of 2010 and the lessons learned, Mr. Bryant said three issues worked against Kellogg: supply chain, trade dynamics and innovation. The company now is in the process of managing itself better going forward, he said. In the case of supply chain, a significant cereal recall was a major factor that led Kellogg to audit its supply base and subsequently, to make some changes. “We’re discontinuing a number of those suppliers, and we’ve added a lot of investments back into the capital and the people — all within our 2011 guidance,” Mr. Bryant said. “And we believe that we’re mitigating a lot of the risks out there from a food safety perspective and a food quality perspective. I think we’ve taken those lessons learned and moved on.” Trade dynamics in cereal also played a role in Kellogg’s performance during 2010. Post Foods, which pulled back on some its trade spending in 2009 after its integration with Ralcorp Holdings Inc., came back aggressively in 2010. That, combined with heavy promotional activity by Kellogg and General Mills, Inc., led to deflation in the cereal category. Mr. Bryant said Kellogg now is seeing price realization improvement in the category. “I think there’s a better dynamic out there, as all the major players turn from trade discounting to what really drives the category, which is brandbuilding and innovation,” he said. The final area that worked against Kellogg in 2010 was innovation. After spending about $800 million a year in innovation in 2007-08, Kellogg cut back to about $600 million in 2009-10 as it moved resources to renovation, including reducing sugar, salt and trans-fatty acids. “That’s all great, but the reduction of the negative is not as powerful as the addition of a positive, in terms of getting consumers to buy products,” he said. “As we go into 2011, we’re back up to about $800 million of innovation. And you’re seeing that 16 / June 14, 2011 Milling & Baking News work in the marketplace with share gains in all our major categories across the U.S., and solid top-line performance in the first quarter.” Moving beyond Kellogg to the broader packaged good industry, Mr. Bryant said he sees several megatrends that probably will continue, including cost inflation, health and wellness and an acceleration of growth in international markets. Specific to the United States, changes in the U.S. regulatory environment over the past several years have 200 calories, the cereal with a bowl of milk. And we believe we have a positive role to play in helping childhood obesity. “The issue we have with some of the guidelines that are out there now is they basically do not enable the food companies to advertise to kids items even as healthy as cereal. So we need to find a good balance here, so industry and government can work together with consumers to improve the nutritional position of the U.S. consumer.” Emphasizing the importance of brand building at Kellogg, Mr. Bryant said the company spends about 9% of After a year of discounting, Kellogg has returned to innovation and brand building in its ready-to-eat cereal business. set the stage for more changes to come in the future. The two primary areas of impact are in food safety and advertising to children, Mr. Bryant said. On the food safety side, Mr. Bryant said Kellogg is a strong supporter of the Food Safety Modernization Act. “We believe that the U.S. has an opportunity to strengthen its food safety system,” he said. “Regulation and legislation have evolved a play in that. And we’re working closely with various government agencies to try to help ensure that’s productive and positive.” Turning to advertising to children, Mr. Bryant stressed that while food companies have a role to play, any proposed guidelines or limitations must make sense. “If your primary objective is obesity, that’s about calories-in/caloriesout,” he said. “Cereal is a low-calorie, nutrient-dense food form — less than sales on advertising. By comparison, most other U.S. packaged food companies spend about 4% to 5%. Mr. Bryant said a revolution going on globally is changing the way companies build brands, though. “If you go back three years ago in the U.S., we were spending less than 5% of our advertising on digital,” he said. “This year, we’re spending over 20% of our advertising on digital. And how we’re engaging in traditional is changing dramatically every couple of years.” How this plays out in future advertising spend is hard to predict, Mr. Bryant said. “At this stage, our guidance is that we plan to continue to increase our brand-building investment, because that’s how we drive our business, and just use these tools more effectively, and continue to migrate away from the 30-second ad, and drive more aggressively into digital,” he said. MBN /

Table of Contents for the Digital Edition of Milling & Baking News - June 14, 2011

‘Grain chain’ gives unanimous support for MyPlate
Canadian government targets C.W.B. monopoly on wheat marketing
MacLennan named president of Cargill
Celebrations may be premature for bakery fl our buyers
Editorial - Last hope for Doha Round not becoming non-Round
Wayne Turnbull reopens New Orleans bakery
General Mills adds Fiber One 90-Calorie Brownies
Packaged snacks sales reach $64 billion
Nestle joins project of food, genes
G.F.F.: One-ounce servings key to balanced meals
Oldways director offers mixed review of MyPlate
Stimulus boost for SNAP helps avert diminished food security
Smucker full-year profi t falls 3% on restructuring, acquisition costs
Debate likely to rage on, but HFCS demand seen stabilizing in U.S.
Kellogg sets 2010 to the side, looks forward to better 2011
Analyst: Nestle ‘unlikely’ to acquire General Mills
Grain Processing investing $100 million in emission reduction projects
Winter wheat crop forecast for 2011 up 2% from May
Wheat carryover forecast for 2012 lowered to 687 million bus
High fuel prices push shipping costs up; weather slows Upper Midwest rail traffi c
Canadian government targets C.W.B. monopoly on wheat marketing
Irish Pride launches bread with omega-3 fatty acids
Acquisitions help drive revenue gains at Aryzta in quarter
F.A.O. sees no respite from grain price strength and volatility
Gonnella offering scholarship to attend AIB
Paul Ridder named president of Tasty; Charles Pizzi to remain as adviser to Flowers
Chris Delaney named c.e.o. of Goodman Fielder
Bob Klima joins Caravan as business development manager
Fruit powder provides vitamins, fiber
Non-dairy ingredient achieves pareve certification
Products focus on noodle production
Trademark signifi es sustainable palm oil
Enzyme concentrate enhances baking properties of flour
U.S.D.A. raises forecast for 2011-12 world wheat ending stocks
Ingredient Market Trends
Ingredient Week
Marketplace Business Network
Ad Index

Milling & Baking News - June 14, 2011